China Alternative Dispute Resoluation Practice

Monday, 07 January 2013 12:25

Alternative dispute resolution (ADR) in China includes dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation.We are China dispute resolution lawyers, and our China attorneys are experts in ADR practice.

It is a collective term for the ways that parties can settle disputes, with (or without) the help of a third party. Despite historic resistance to ADR by many popular parties and their advocates, ADR has gained widespread acceptance among both the general public and the legal profession in recent years. In fact, some courts now require some parties to resort to ADR of some type, usually mediation, before permitting the parties' cases to be tried (indeed the European Mediation Directive (2008) expressly contemplates so-called "compulsory" mediation; attendance that is, not settlement at mediation). The rising popularity of ADR can be explained by the increasing caseload of traditional courts, the perception that ADR imposes fewer costs than litigation, a preference for confidentiality, and the desire of some parties to have greater control over the selection of the individual or individuals who will decide their dispute. Some of the senior judiciary in certain jurisdictions (of which England and Wales is one) are strongly in favour of the use of mediation to settle disputes.

In the late 1980s and early 1990s, many people became increasingly concerned that the traditional method of resolving legal disputes in the United States, through conventional litigation, had become too expensive, too slow, and too cumbersome for many civil lawsuits (cases between private parties). This concern led to the growing use of ways other than litigation to resolve disputes. These other methods are commonly known collectively as alternative dispute resolution (ADR).

As of the early 2000s, ADR techniques were being used more and more, as parties and lawyers and courts realized that these techniques could often help them resolve legal disputes quickly and cheaply and more privately than could conventional litigation. Moreover, many people preferred ADR approaches because they saw these methods as being more creative and more focused on problem solving than litigation, which has always been based on an adversarial model.

The term alternative dispute resolution is to some degree a misnomer. In reality, fewer than 5 percent of all lawsuits filed go to trial; the other 95 percent are settled or otherwise concluded before trial. Thus, it is more accurate to think of litigation as the alternative and ADR as the norm. Despite this fact, the term alternative dispute resolution has become such a well-accepted shorthand for the vast array of nonlitigation processes that its continued use seems assured.

Although certain ADR techniques in China are well established and frequently used—for example, mediation and arbitration—alternative dispute resolution has no fixed definition. The term alternative dispute resolution includes a wide range of processes, many with little in common except that each is an alternative to full-blown litigation. Litigants, lawyers, and judges are constantly adapting existing ADR processes or devising new ones to meet the unique needs of their legal disputes. The definition of alternative dispute resolution is constantly expanding to include new techniques.

ADR techniques have not been created to undercut the traditional Chinese court system. Certainly, ADR options can be used in cases where litigation is not the most appropriate route. However, they can also be used in conjunction with litigation when the parties want to explore other options but also want to remain free to return to the traditional court process at any point. Of the many ways to resolve a legal dispute other than formal litigation, mediation, arbitration, mediation-arbitration, Minitrial, early neutral evaluation, and summary jury trial are the most common.

Mediation

Also known as conciliation—is the fastest growing ADR method. Unlike litigation, mediation provides a forum in which parties can resolve their own disputes, with the help of a neutral third party. Mediation depends upon the commitment of the disputants to solve their own problems. The mediator, also known as a facilitator, never imposes a decision upon the parties. Rather, the mediator's job is to keep the parties talking and to help move them through the more difficult points of contention. To do this, the mediator typically takes the parties through five stages.

First, the mediator gets the parties to agree on procedural matters, such as by stating that they are participating in the mediation voluntarily, setting the time and place for future sessions, and executing a formal confidentiality agreement. One valuable aspect of this stage is that the parties, who often have been unable to agree on anything, begin a pattern of saying yes.

Second, the parties exchange initial positions, not by way of lecturing the mediator but in a face-to-face exchange with each other. Often, this is the first time each party hears the other's complete and uninterrupted version. The parties may begin to see that the story has two sides and that it may not be so unreasonable to compromise their initial positions.

Third, if the parties have agreed to what is called a caucusing procedure, the mediator meets with each side separately in a series of confidential, private meetings and begins exploring settlement alternatives, perhaps by engaging the parties in some "reality testing" of their initial proposals. This process, sometimes called shuttle diplomacy, often uncovers areas of flexibility that the parties could not see or would have been uncomfortable putting forward officially.

Fourth, when the gap between the parties begins to close, the mediator may carry offers and counteroffers back and forth between them, or the parties may elect to return to a joint session to exchange their offers.

Finally, when the parties agree upon the broad terms of a settlement, they formally reaffirm their understanding of that settlement, complete the final details, and sign a settlement agreement.

Mediation permits the parties to design and retain control of the process at all times and, ideally, eventually strike their own bargain. Evidence suggests that parties are more willing to comply with their own agreements, achieved through mediation, than with adjudicated decisions, imposed upon them by an outside party such as a judge.

An additional advantage is that when the parties reach agreement in mediation, the dispute is over—they face no appeals, delays, continuing expenses, or unknown risks. The parties can begin to move forward again. Unlike litigation, which focuses on the past, mediation looks to the future. Thus, a mediated agreement is particularly valuable to parties who have an ongoing relationship, such as a commercial or employment relationship.

Arbitration

Arbitration more closely resembles traditional litigation in that a neutral third party hears the disputants' arguments and imposes a final and binding decision that is enforceable by the courts. The difference is that in arbitration, the disputants generally agreed to the procedure before the dispute arose; the disputants mutually decide who will hear their case; and the proceedings are typically less formal than in a court of law. One extremely important difference is that, unlike court decisions, arbitration offers almost no effective appeal process. Thus, when an arbitration decision is issued, the case is ended.

Final and binding arbitration has long been used in labor-management disputes. For decades, unions and employers have found it mutually advantageous to have a knowledgeable arbitrator—whom they have chosen—resolve their disputes in this cheaper and faster fashion. One primary advantage for both sides has been that taking disputes to arbitration has kept everyone working by providing an alternative to strikes and lockouts and has kept everyone out of the courts. Given this very successful track record, the commercial world has become enthusiastic about arbitration for other types of disputes as well.

Mediation-Arbitration

As its name suggests, mediation-arbitration, or med-arb, combines mediation and arbitration. First, a mediator tries to bring the parties closer together and help them reach their own agreement. If the parties cannot compromise, they proceed to arbitration—before that same third party or before a different arbitrator—for a final and binding decision.

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